Foreclosed homes get new life on Milwaukee's north side

While the number of foreclosed houses in Milwaukee's central city remains high, one company's efforts to redevelop many of those properties continue to make progress.

A series of investments by developer Gorman & Co., partly financed with federal tax credits, since 2007 has converted foreclosed houses, vacant lots and three small foreclosed apartment buildings into around 300 new or renovated rental units on Milwaukee's north side.

The properties sold to Gorman were acquired by the city through property tax foreclosure, and would otherwise be candidates for demolition because of their poor condition.

The renovated and newly built homes generate property tax revenue, with their tenants bringing new life back to some of Milwaukee's poorest neighborhoods. Those renters can eventually buy their homes from Gorman at discounted prices.

Meanwhile, Gorman is hiring chronically unemployed people to do much of the work — providing training that could lead to additional construction industry jobs.

Gorman alone won't eliminate Milwaukee's inventory of foreclosed houses. Those currently total around 1,100 residential properties owned by the city, with additional ones owned by lenders.

But investments by the Oregon, Wis.-based firm and Milwaukee-based Maures Development Group LLC are raising hopes that those houses will continue to be rented to families, which helps restore property values and reduces the city's financial burden, said Mayor Tom Barrett.

The companies "have been really strong partners" in that effort, Barrett said.

Gorman, which also develops apartment buildings, hotels and other commercial properties in the Milwaukee area and elsewhere, first bought city-owned vacant lots in 2007 for $1 apiece. The firm used those parcels for around 30 new rental homes built in the Metcalfe Park neighborhood.

Gorman did its first purchase of foreclosed city-owned houses in 2011.

The firm bought 21 vacant city-owned duplexes, for $5,000 apiece, in an area bordered by W. North Ave., W. Vliet St., Washington Park and N. 20th St.

Gorman financed that $7.4 million project mainly with federal affordable housing tax credits — the same method the firm has used in other phases. Gorman also provides additional equity financing and borrows money from private lenders for the projects.

Development firms seek the tax credits through annual competitions, which in Wisconsin are overseen by the Wisconsin Housing and Economic Development Authority.

Developers typically sell the credits to raise cash. In return, they must rent apartments at below-market rates to families whose median income is less than 60% of the Milwaukee area's median income.

Gorman created 40 rental units from the duplexes it bought in 2011.

Since then, Gorman has done additional purchases and redevelopments of foreclosed homes on Milwaukee's north side. The most recently completed phase created 40 rental units throughout the Sherman Park neighborhood, with the firm now operating 300 central city housing units created by redeveloping foreclosed properties.

Other developers have bought and renovated foreclosed houses on Milwaukee's north side.

A partnership of Maures Development Group and Northbrook, Ill.-based Brinshore Development LLC used tax credits to help redevelop foreclosed houses into 75 rental units.

Those two phases started in 2013 and 2014, with the apartments promptly filling up, said Melissa Goins, Maures owner.

Also, nonprofits such as ACTS Housing have been involved in the city's overall effort to redevelop foreclosed homes, which the Barrett administration calls the Strong Neighborhoods Plan.

City changes policy

Gorman and Maures became more involved after the Common Council in 2011 approved a change in city policy to allow sales of tax-foreclosed homes to investors, not just owner-occupants.

That old restriction was designed to keep the properties from being purchased by absentee landlords. City officials feared those owners would be more prone to neglect the properties, or rent them to criminals and other bad tenants.

The policy was changed because of the rapidly increasing number of city-owned foreclosed homes after the 2007 housing bubble burst, and the 2008 financial crisis and recession.

The city owned 110 foreclosed buildings, most of them residential properties, at the end of 2008.

Milwaukee now owns 1,121 foreclosed residential properties. Over 1,000 of those are single-family homes and duplexes, according to the Department of City Development.

But Milwaukee also is selling more of its foreclosed houses and commercial properties, from 30 sales in 2008 to 438 sales in 2014, according to the department.

Gorman's latest project involves buying 20 units of single-family and duplex houses, 16 vacant lots and four unusable houses that the city was already planning to demolish. Gorman is paying the city just over $50,000 for the properties.

The firm plans to create 40 new rental units, half from renovated houses and half from new construction. The estimated total project cost is $9 million.

The latest batch of properties is clustered near Century City Business Park, which the city is developing at the former Tower Automotive Inc./A.O. Smith Corp. complex, south of W. Capitol Drive and west of N. 27th St.

Gorman's previous developments had houses located farther apart, Ted Matkom, Gorman Wisconsin market president, told members of the Common Council's Zoning, Neighborhoods and Development Committee. The idea was to spread the investment's impact throughout much of the north side, he said.

But the firm has since learned it can create a stronger effect by concentrating the developments closer to one another, Matkom said. Most of the Century City homes will be within roughly a five-block radius, compared with a one-mile radius for the earlier development phases.

The committee voted 4-0 Tuesday to recommend approval for the property sales, which the full council is to review at its Nov. 24 meeting.

Rent-to-own deals

Gorman's developments could bring more homeownership to the central city.

The families renting the houses will have the opportunity to buy the properties after the 15-year tax credit term expires. Federal law prohibits selling the houses before that term ends.

Gorman will sell the houses for an amount equal to the remaining debt on the property, which Matkom said is projected at an average of $35,000.

In past phases, that's resulted in workers being trained in lower-level skills, such as demolition and siding installation, Matkom said.

With the next phase, those workers will undergo additional training through the workforce board, with Milwaukee Area Technical College's planned involvement. That will prepare them to enter apprenticeship programs to become carpenters, plumbers and electricians on commercial projects, he said.

"Now, you have an actual career to pursue," Matkom said.

Also, those skills often can be applied to manufacturing industry jobs, said Sheila Cochran, a workforce board director and chief operating officer of the Milwaukee Area Labor Council AFL-CIO.

A person with such skills has a much better chance of finding work, Cochran said, in an interview.

The job training complements efforts to develop Century City Business Park, where the city hopes to attract companies that provide family-supporting jobs, Barrett said.

Gorman's efforts over the past several years with both housing development and job training "are truly to be commended," said Ald. James Bohl, zoning committee chair.

The firm has a waiting list of around 50 to 60 families for the houses, Matkom said after the committee meeting.

"The people who are renting here are real families with real jobs," he said.

Matkom said many renters are single African-American women with children — in part reflecting Milwaukee's high unemployment rate for African-American men.

"But the good news about that is these women are fighting for their families," he said. "They're great renters."

Michael and Juanita Gill moved from Georgia to a Gorman-owned house in February. Michael Gill is disabled, and his wife, who cares for him, said the accessible, affordable home is a big help.